|By Emile Picy and Chine Labbé

|By Emile Picy and Chine Labbé

|By Emile Picy and Chine Labbé

|By Emile Picy and Chine Labbé

PARIS (Reuters) - French police searched presidential candidate Francois Fillon's office in parliament on Tuesday as an inquiry into alleged fake work by his wife threatened his campaign and party leaders began to consider a 'Plan B' without him.

Fillon had been favorite to win the presidency for the conservative Republicans party until a week ago, when it was reported that his wife Penelope had drawn hundreds of thousands of euros in pay from state funds without doing any work.

Fillon has said his Welsh-born wife, with whom he has five children, did real work for her pay as a parliamentary assistant. She has not commented.

An opinion poll published on Sunday showed him losing support, with rival independent centrist Emmanuel Macron having caught up with him. A poll on Tuesday indicated 76 percent of voters were not convinced of his professed innocence.

With the inquiry gathering pace, party officials began to wonder whether, and how, they might replace him.

"The way things are going, I think we might have to quickly trigger a plan B," said one lawmaker on condition of anonymity.

"Plan B. Lots of people are thinking, reflecting and working on it but no one will speak openly about it," said another influential Republicans member of parliament.

The allegations of pay for fake work, published in satirical weekly Le Canard Enchaine, cast doubt on the squeaky-clean image that helped Fillon win his party's primary election over rivals who had faced legal issues in the past.

The inquiry into whether the hundreds of thousands of euros his wife received in salary was a misuse of taxpayer's money also highlights a key plank of his campaign - that the state spends too much and half a million public sector jobs should go.

"This will sicken people who are on the minimum wage or not much more," the second lawmaker said. The biggest fear in the party, he said, was that Fillon would be damaged enough to lose the election, but not enough to pull out.

NO PRECEDENT

Fillon has said he would step down as presidential candidate should he be put under formal investigation, but it is unclear how The Republicans would find a replacement for him.

He was chosen last November in the party's first ever primary contest, so there is no precedent to look to if he quits with less than three months to go until the election.

The scandal has coincided with the Socialist Party's choice last weekend of a hard-left figure, Benoit Hamon, as its presidential candidate - a move also seen as helping Macron.

A group of right-leaning Socialist lawmakers wrote in Le Monde newspaper on Tuesday that they could not back Hamon, the clearest sign yet that his appointment could tear the party apart, with some tempted to join the Macron camp.

Meanwhile, far-right candidate Marine Le Pen faced her own battle with authorities over use of public funds.

From midnight, the National Front (FN) leader faces a pay cut of some 7,000 euros a month as punishment from the EU parliament for using money earmarked for a parliamentary assistant to pay one of her own party officials.

ONE MILLION EUROS

Le Canard Enchaine's report a week ago said Penelope Fillon - who had previously maintained she did not get involved in her husband's political affairs - had been paid 500,000 euros ($534,000) from state funds as a parliamentary assistant to Fillon and his successor.

The newspaper said it could find no evidence that she had actually done any work.

In an update on its findings on Tuesday, it said the figure was actually higher, at 831,440 euros. It added that the Fillons' children were also paid - a combined 84,000 euros.

Add to that a 100,000 euro payment the newspaper said was paid to her for very little work by a literary review owned by family friend Marc Ladreit de Lacharriere, and the figure in the newspaper's sights tops one million euros.

The payments involved were made in the years between 1988 and 2013, the newspaper said.

The Fillons and Ladreit de Lacharriere were all interviewed by the police leading the inquiry on Monday, a day after the full force of the scandal was laid bare in an opinion poll.

Fillon told a European business group on Tuesday that he remained unperturbed by the allegations and was waiting for the investigation to end.

"I'm confident, I'm unfazed," Fillon said, adding that he was the target of a professional slander operation.

Pollster Kantor-Sofres on Sunday put Macron and Fillon almost neck-and-neck, on 20-21 and 21-22 percent of the vote respectively in the first round on April 23, with Fillon having lost ground compared with a month ago.

Only one of them would go through to the second-round runoff on May 7 against predicted first-round winner Le Pen, seen as getting around 25 percent, the poll said.

There, either man would win the run-off easily with over 60 percent of the vote because many French consider Le Pen and her National Front too far to the right to vote for them.